Certification Standard Has Not Emerged in Emergency Preparedness Plans, Says The Conference Board

April 30The majority of U.S. companies have a formal, written plan for emergency preparedness, according to a report released by The Conference Board. But a widely adopted certification standard for such plans does not exist yet.

Three-quarters of the 302 senior corporate executives surveyed in mid-2007 said an emergency preparedness plan exists in their companies. The analysis was sponsored by the U.S. Department of Homeland Security as part of an ongoing research project to assess the effectiveness of security in American companies.

The survey sample was intended to reflect the characteristics of American businesses as defined by size and industry. The sample was divided into three strata: small business (companies with $5 to $50 million in annual sales); mid-market ($50 million to $1 billion in sales); and enterprise ($1 billion or more in sales). Within these groups of companies, the survey polled executives with responsibility for security, business continuity, crisis management and emergency-response efforts.

A “voluntary” certification process for preparedness was adopted as part of the 2007 homeland security legislation (Public Law 110-53). The choice of standards that would permit certification under the law is under review. As this report goes to press, it is expected that several different standards may qualify for certification.

“Currently, the most significant finding is that none of the many standards proposed for certification has attained widespread usage in the private sector,” said Thomas Cavanagh, senior research associate for global corporate citizenship at The Conference Board.

The most common standard is the ISO 27001/17799 information security standard that has been implemented by 23 percent of the surveyed companies. Following close behind, used by 20 percent of companies, is NFPA 1600, which was endorsed as the National Preparedness Standard in 2004 by DHS, the U.S. Congress, the 9/11 Commission and the American National Standards Institute (ANSI). Three other kinds of standards have all been implemented by 12 percent of companies.

The Larger the Company, the More Prepared The larger companies are much more likely to have implemented the most widely known standards. At the enterprise level, 30 percent have adopted the ISO information security standard, compared with 24 percent of mid-markets and 15 percent of small businesses. Despite its high visibility as the National Preparedness Standard, NFPA 1600 has been implemented by 29 percent of large companies and less than 18 percent of those below the enterprise level. NIMS (the National Incident Management System) has been adopted by 19 percent of enterprise-level firms, compared to 10 percent of mid-markets and only 4 percent of small companies. The discrepancy is most dramatic with regard to C-TPAT, which has been implemented by one-quarter of large businesses but only single-digit percentages of companies with less than $1 billion revenue.

As with the other procedures examined, the size of the company has a major impact on the level of preparedness. Roughly three-quarters of companies at the enterprise level conduct regular risk audits, mitigation and activation of their backup facilities, and two-thirds undertake regular tabletop exercises.

Annual risk audits are conducted by 69 percent of mid-market companies, and 53 percent of mid-markets report that they conduct regular mitigation activities and backup site activation. However, only 31 percent conduct tabletop exercises at least once a year. Fewer than half of small businesses report that they conduct any of these activities on an annual basis.

Different industries have different approaches to the pursuit of preparedness. The clearest example is the IEEE SCADA standard that is used by many firms in the energy industry (38 percent) but is rarely encountered in other sectors of the economy. NIMS is the most widely utilized in the energy and health care industries (38 percent and 29 percent respectively). The financial services industry leads the way in the implementation of NFPA 1600 (36 percent) and the ISO IT standard (33 percent).

Ownership Structure and Industry Ownership structure is also strongly related to these aspects of preparedness. Among publicly traded companies, at least 70 percent report that they conduct risk audits, mitigation and backup-site activation at least once a year, and 59 percent undertake annual tabletop exercises.

The proportion conducting annual risk audits falls to 58 percent for privately held companies and 47 percent for family-owned companies. Only 52 percent of private firms and 37 percent of family-owned companies conduct annual backup activation, and regular mitigation is undertaken by 43 percent of private companies and 40 percent of family firms. Regular tabletop exercises are conducted by only one-third of private companies and one-10th of family-owned businesses.

The financial services sector is at or near the top of the list of industries on virtually every one of these procedures, with especially impressive showings for backup facility activation (72 percent) and tabletop exercises (64 percent). Service industries are most likely to schedule “work from home” days, a procedure most commonly followed in healthcare (39 percent), business and professional services (36 percent) and other services (32 percent).Crisis Communications The most common item in emergency preparedness plans is crisis communications, which is included in 91 percent of the plans. Almost as common is inclusion of evacuation procedures, present in 89 percent of plans. Other common items are securing access to facilities in 77 percent of plans, locating employees in 75 percent, first aid in 65 percent, liaison with first responders in 64 percent, legal representation in 42 percent and coping with stress and trauma in 39 percent.

Compared with smaller companies, firms at the enterprise level are far more likely to have implemented written plans that contain these specific items. The differences are most striking with regard to organizational procedures that go beyond the immediate needs of first responders and involve dealing with stakeholders in the outside world. Eighty-eight percent of large companies have a written plan for crisis communication, compared to 63 percent of mid-markets and 48 percent of small businesses; and 52 percent of enterprises have a written plan for legal representation in the event of an emergency, as opposed to 24 percent of mid-market firms and 17 percent of small companies.

Some Plans Have Board ApprovalAmong the companies with emergency preparedness plans, 58 percent have had the plan approved by their board. Therefore, 43 percent of companies overall have written emergency preparedness plans that have been approved by the board.

Among large companies, 92 percent of companies have a written plan, compared with 72 percent of mid-markets and 58 percent of small businesses. But only one-third of large companies have plans that have been formally approved by their board, compared to 49 percent of mid-markets and 44 percent of small firms.

“It is quite surprising that so few large companies have board approval on their emergency preparedness plans,” says Cavanagh. “This could be because in larger companies, emergency preparedness is considered an operational rather than a strategic issue, so it may not be considered essential to send it to the board for review.”

Off-Site Storage Very PopularThe most common procedure companies currently have in place for emergency preparedness is by far the maintenance of an off-site storage of data and documents. This step is essential for business continuity in the event that a firm’s primary facility is damaged or otherwise inaccessible. Fully 81 percent of companies report that they store these materials off-site.

But a much smaller proportion (40 percent) has an off-site emergency operations center. Approximately 62 percent of companies maintain a phone tree, and the same percentage has installed security checkpoints at entries to their facilities. With regard to other procedures, 42 percent have a travel management system and 21 percent have provided emergency survival kits to employees.

Some basic procedures are performed at least annually by a wide range of companies. Fully 83 percent of companies regularly update their emergency contact information, and 81 percent conduct fire and/or evacuation drills at least once a year. Two-thirds of companies give regular messages about security to their employees and conduct risk assessments and vulnerability audits, while 57 percent follow up the audits by implementing plans to mitigate the identified weaknesses.

Some 56 percent of companies activate their backup facility in a test at least once a year. Some other procedures are considerably less common. Only 42 percent of companies conduct tabletop exercises on a regular basis, and only one-quarter schedule “work from home” days in advance to test their resiliency in the event that their personnel are unable to work from their main facility.

Business Continuity Plans Closely RelatedBusiness continuity programs originate from the need to recover IT operations in the event of a system crash. So it is not surprising that the most frequently mentioned item in BC plans is maintaining IT systems, present in 92 percent. In general, the most common items on the BC checklist refer to basic utilities, facilities and HR issues.

For example, moving operations to off-site locations and communicating with employees are mentioned by 82 percent apiece, followed by providing telecom services (78 percent), backup electrical generators (77 percent), identifying essential employees (75 percent), and working from home (71 percent).

A second cluster of issues, which is less commonly addressed, concerns the conduct of business operations. These items include conducting financial transactions (mentioned by 70 percent), contingency plans with suppliers (65 percent), coping with an avian flu pandemic (51 percent), prioritizing customers (49 percent), disruption of business travel (40 percent), and alternative transportation of goods (32 percent). The relative lack of attention to transportation issues may be somewhat surprising and even alarming, in light of the extent to which supply and distribution chains now extend across the globe for American businesses.

Companies at the enterprise level are especially likely to have implemented business continuity plans dealing with the conduct of business operations. The energy and finance sectors are most likely to have written business continuity plans, with 92 percent of energy companies and 90 percent of financial firms reporting such a plan. These two industries also lead the way on virtually all of the specific items that were asked about in the plans. One interesting anomaly is that the health care sector scores quite low on many aspects of business continuity planning, often at levels comparable to the trade and industrial manufacturing sectors.